Ford Motors to Invest $1 Billion In Mexico as It Plans to Establish a New Manufacturing Facility in the Region

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The auto-maker is planning to make a production shift from Michigan to Mexico because of cheap labor.

In order to increase the productivity in Mexico, Ford Motors Company has decided to set up a new manufacturing facility in the country. This move on the auto-maker’s part will improve the efficiency at the new plant and slash costs as well.

This action plan is likely to be implemented later this year; the new plant which will be built in San Luis Potosi, Mexico will cost the corporation as much as $1 billion, as per the reports by The Wall Street Journal. Furthermore, it already has an assembly plant near Mexico which is plans to expand during the year. By the year 2019, Ford is aiming at increasing the production capacity by as much as 500,000 units annually. During the previous year, the total number of vehicles manufactured in the region was 433,000 which amounted to 14% of all the production in North America.

Presently, this new has not been confirmed by the automobile manufacturer as yet; since the spokesman has declined to comment on it at this time. As per the news by The Wall Street Journal, this plant that will be set up in Mexico will be producing the company’s latest hybrid automobile – and this will be the place where the model will be launched from as well. Ford is launching this hybrid model to tackle Toyota’s hybrid car, Prius. Additionally, the news all suggests that sports cars as well as utility trucks will also be built at this facility.

In Mexico, over the past few years, a number of automobile companies have started production of their vehicles. One of which is General Motors as it plans to invest as much as $5 billion to build a manufacturing facility in the region. Furthermore, along with GM, BMW has also announced back in 2014 of building a plant worth $1 billion in the region as well where it would employee as many as 1,500 workers. According to the information provided by BMW, the production in the specific facility is expected to start in the next two years.

Mexico has become the hub of all the auto-making facilities mainly because of the low wage rates, (cheap labor), along with efficient logistics management. Another reason for this production shift is because the United Auto Workers Union has been successful in convincing authorities to increase the minimum wage all across the United States. According to the WJS, the labor cost in Mexico is almost one fifth of what it is in the United States.

Subsequently, in the European market, the automaker plans to eliminate a few of its model as well as cut jobs. It stated that it has suggested voluntary buyouts to as many as 10,000 employees at the corporation. As for the models that it plans to stop making in the region are the ones that don’t make enough profits in Europe and it is planning to shift its focus on sports cars and higher profit cars.

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